WEBVTT - Surveillance: Normalization With Former ECB President Trichet 0:00:00.080 --> 0:00:12.960 Ye, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.240 Bloomberg dot Com, and of course on the Bloomberg We 0:00:27.320 --> 0:00:30.600 consider the market moves. The moves continue this morning with 0:00:30.720 --> 0:00:33.839 tweet Line Noyan of Commerce Bank and Daniel Morris of 0:00:33.880 --> 0:00:37.040 course of BNP Perry by joining us as well tweet 0:00:37.040 --> 0:00:38.559 what will this do to the dollar? Do you have 0:00:38.600 --> 0:00:41.640 to reset at Commerce Bank your dollar call off what 0:00:41.760 --> 0:00:47.760 Chairman Paul said? Uh No, Actually, in fact we feel 0:00:47.880 --> 0:00:51.800 confirmed in our dollar of you. We have been expecting 0:00:51.840 --> 0:00:56.320 a weekending dollar UM next year, particularly as the fat 0:00:56.440 --> 0:00:59.680 hiking cycle will draw to an end and markets concentrate 0:00:59.720 --> 0:01:02.160 on that and UM. This is a common pattern that 0:01:02.200 --> 0:01:05.200 we've seen in the past with past rate hike pikers. 0:01:05.319 --> 0:01:10.199 As the andraws near, the dollar doesn't benefit from from 0:01:10.240 --> 0:01:12.759 the last couple of rate hips anymore, as the market 0:01:12.880 --> 0:01:16.840 is already foreseeing UM the peak of interest rates, and 0:01:16.880 --> 0:01:19.920 actually UM the dollar starts to weaken UM. So, in 0:01:20.000 --> 0:01:25.120 fact Powell has confirmed our view in that very good 0:01:25.160 --> 0:01:27.600 Dan Morris, let us look at John Authors, who channels 0:01:27.680 --> 0:01:32.759 Jeremy grandson of GMO here on the old Bronosurus Cbranosaurus model. 0:01:32.760 --> 0:01:36.120 They served rannosaurs at lunch yesterday as well as wonderful 0:01:36.200 --> 0:01:40.319 Chairman Powell wants more room for discretion. The stock market 0:01:40.400 --> 0:01:43.080 to a bronosaurs, Well, it took a long time for 0:01:43.160 --> 0:01:46.720 information to go from the brono sours his head to 0:01:46.920 --> 0:01:49.880 its tail. In the same way, the bond market is 0:01:49.920 --> 0:01:53.360 the bronosaurs his head, and the stock market just simply 0:01:53.400 --> 0:01:56.400 gets the news. Last, Dan Morris, I mean we see 0:01:57.280 --> 0:02:01.880 again the communication here of any given central banker, the 0:02:01.920 --> 0:02:04.120 bond market picks up with it. Do you have to 0:02:04.160 --> 0:02:10.359 reset your bond framework off what the chairman said? Actually 0:02:10.480 --> 0:02:12.600 not at all, And if anything, we're a bit concerned 0:02:12.639 --> 0:02:15.200 that the market is over interpreting his comments. I think 0:02:15.240 --> 0:02:17.320 if we step back and look at the outlook for 0:02:17.360 --> 0:02:20.040 inflation for next year, the strength of the economy, the 0:02:20.120 --> 0:02:23.680 level of unemployment and so on, that still suggests three 0:02:23.760 --> 0:02:25.920 hikes is appropriate in our view for next year. So 0:02:25.960 --> 0:02:28.040 we may have a pause, be that a March or 0:02:28.120 --> 0:02:29.919 b then in June, and that is on the margin 0:02:30.000 --> 0:02:33.679 a change from what we had thought previously. But fundamentally 0:02:33.800 --> 0:02:35.639 we think you are going to see how interest rates 0:02:35.639 --> 0:02:38.359 of FED is not going to stop raising rates December, 0:02:38.480 --> 0:02:40.600 isn't it. There's going to be more than one next year, 0:02:41.080 --> 0:02:42.840 And for now the market is ignoring all of that. 0:02:42.880 --> 0:02:45.760 We've obviously got the big rally, but eventually the realization 0:02:45.800 --> 0:02:48.079 is going to set back in about her interest rates 0:02:48.080 --> 0:02:49.400 and then there's a risk, of course, at all of 0:02:49.400 --> 0:02:51.400 these reverses. So Dan, where do you want to be 0:02:51.400 --> 0:02:54.800 invested right now? Take advantage of that well, and we 0:02:54.880 --> 0:02:57.440 are in were neutral and equities overall in our multass 0:02:57.440 --> 0:02:59.640 of portfolio, but we're still underweight fixed income. So you 0:02:59.680 --> 0:03:02.360 can't particularly enthusiastic about equity at the point, but on 0:03:02.400 --> 0:03:05.480 a relative basis, we think they should outperform. So that's 0:03:05.560 --> 0:03:07.679 kind of our position at this point. Then let me 0:03:07.720 --> 0:03:10.160 kick off with you. When you look at brexit, is 0:03:10.200 --> 0:03:13.520 it doomsday scenario if we don't have a deal, Does 0:03:13.560 --> 0:03:15.919 it now make it more likely that we do get 0:03:15.960 --> 0:03:19.080 the deal? Improvement in Parliament? We think of a range 0:03:19.080 --> 0:03:22.040 of options. We have a plethora surfeit of alternatives. I 0:03:22.040 --> 0:03:23.560 think at this point of how it can play out, 0:03:24.200 --> 0:03:26.440 I think the forecast that we've seen is kind of 0:03:26.440 --> 0:03:28.640 the worst case assumption, which is you end up not 0:03:28.720 --> 0:03:30.600 only with no deal in the crashing out, but no 0:03:30.720 --> 0:03:34.040 kind of mitigating efforts between now and then to ANNAILU. Right, 0:03:34.120 --> 0:03:36.320 what could be the effects at that point? So you know, 0:03:36.360 --> 0:03:38.680 if that's our worst case, uh, and then we go 0:03:38.920 --> 0:03:42.080 from there towards you know, a remain where nothing really changes, 0:03:42.080 --> 0:03:43.760 so we kind of know what the outlook isn't there. 0:03:43.800 --> 0:03:46.640 But across that there are, like I said, several options 0:03:46.920 --> 0:03:50.080 with different economic effects, and the probabilities of those not 0:03:50.120 --> 0:03:52.360 only are shifting, but there's no one really that stands 0:03:52.360 --> 0:03:55.800 out as highly probable um to land. And what is 0:03:55.880 --> 0:03:59.080 being priced into your brexit or you're actually your pound 0:03:59.080 --> 0:04:03.480 forek offs right now it comes to brexit. UM. I 0:04:03.480 --> 0:04:08.240 mean we've seen that the options market has become relatively nervous. UM. 0:04:08.240 --> 0:04:11.320 You've seen implied volatility is picking up. UM. So the 0:04:11.360 --> 0:04:14.000 market is pricing in or husband pricing in the higher 0:04:14.000 --> 0:04:18.040 probability of a no deal. But the levels are still 0:04:18.080 --> 0:04:21.240 nowhere near um that we saw around the two thousands 0:04:21.279 --> 0:04:24.840 sixteen referendum. So all in all, the market still seems 0:04:24.880 --> 0:04:27.920 relatively relaxed when it comes to a no deal scenario, 0:04:28.400 --> 0:04:30.360 UM and UM. I think that is due to the 0:04:30.360 --> 0:04:33.440 fact that m as just heard, there are so many 0:04:33.720 --> 0:04:37.279 scenarios how this Brexit could play out, what could happen 0:04:37.360 --> 0:04:40.599 after this vote in the British Parliament. UM. There are 0:04:40.640 --> 0:04:44.320 also some scenarios which could play out quite positively for 0:04:44.520 --> 0:04:47.560 the pound. I mean, people are talking about the second referendum, 0:04:47.720 --> 0:04:51.520 which could in the end lead to UM the UK 0:04:51.960 --> 0:04:54.720 remaining in the EU event, which would be positive for 0:04:54.839 --> 0:04:57.560 the pound. UM. So it's very difficult to make a 0:04:57.560 --> 0:05:01.840 pound forecast at this moment with all scenarios, I mean, 0:05:01.880 --> 0:05:04.920 a nicely laid out what are we gonna do? What? 0:05:04.920 --> 0:05:08.200 What do you do? Where? Where is the opportunity on 0:05:08.360 --> 0:05:16.200 pound sterling? UM? I think from a risk return perspective, 0:05:16.360 --> 0:05:20.600 I still think investors with pound exposure UM should take 0:05:20.600 --> 0:05:24.240 the opportunity to hedge their risks in in in their 0:05:24.279 --> 0:05:27.839 long positions, because, as I said, UM, yes, volatilities have 0:05:27.960 --> 0:05:31.640 picked up, but they're still relatively cheap. Because in a 0:05:31.760 --> 0:05:35.440 in a nodeal scenario, I would expect the pound to 0:05:35.520 --> 0:05:38.839 depreciate at least by ten per center even more, UM 0:05:38.920 --> 0:05:41.680 and UM. The market is not yet prepared for that 0:05:41.800 --> 0:05:46.200 so at this moment um, your uh buying implied volatility 0:05:46.320 --> 0:05:52.000 is actually a good risk return investment. All right, thank 0:05:52.000 --> 0:05:53.880 you boys for joining us to Land and there of 0:05:54.000 --> 0:05:58.360 Commerce Bank and done mores of BNP Paraba. We begin 0:05:58.680 --> 0:06:00.520 with a man who served as deep Incident of the 0:06:00.520 --> 0:06:04.080 European Central Bank from two thousand three until two thousand 0:06:04.080 --> 0:06:06.680 and eleven, living through not one but two crises in 0:06:06.720 --> 0:06:10.080 the euro Zone. From Leland, France. It is Jean Claude, 0:06:10.080 --> 0:06:12.520 free Shack and it joins us now. Jean Claude is 0:06:12.560 --> 0:06:15.039 great to catch up with you pleasure to be here. 0:06:15.120 --> 0:06:17.520 Talk to me about how difficult it is to stand 0:06:17.560 --> 0:06:20.200 somewhere like the Economic Club of New York with a 0:06:20.240 --> 0:06:23.400 load of pressure on you to say the right thing. 0:06:23.920 --> 0:06:26.920 How difficult is there? I think it that it is. 0:06:27.200 --> 0:06:29.760 It is quite a challenge, of course. I think that 0:06:29.960 --> 0:06:35.359 Chairman Powell did extremely well, and he probably corrected what 0:06:35.839 --> 0:06:40.440 had been an overinterpretation of his previous message on the 0:06:40.760 --> 0:06:44.960 long Way from Newt Hall in mentioning that it was 0:06:45.040 --> 0:06:48.880 closer from to a Newt Hall than before. I would 0:06:48.880 --> 0:06:52.400 say we have to be aware of both over interpretation. 0:06:53.240 --> 0:06:56.400 But it seems to me that he corrected quite well 0:06:57.240 --> 0:07:00.320 that what might have been an over into put Ducian 0:07:00.400 --> 0:07:02.680 before and now we end up with perhaps another over 0:07:02.720 --> 0:07:05.280 interpretation because just going through the quow at the moment, 0:07:05.320 --> 0:07:09.360 Joan Flatricia reads as follows, interest rates are still accommodative, 0:07:09.400 --> 0:07:11.920 but we're gradually moving to a place where there'll be neutral, 0:07:12.280 --> 0:07:14.760 not restraining growth. We may go past neutral, but we're 0:07:14.760 --> 0:07:16.840 a long way from neutral at this point. Probably that's 0:07:16.880 --> 0:07:20.840 October three, here's novembery. Interest rates are still low by 0:07:20.920 --> 0:07:23.640 historical standards, and they remain just below the broad range 0:07:23.640 --> 0:07:25.800 of estimates at the level that would be neutral for 0:07:25.800 --> 0:07:29.480 the economy now October three to judgment November twenty eight, 0:07:29.600 --> 0:07:31.280 the statement of fact, I mean, we know what the 0:07:31.320 --> 0:07:34.200 broad range of neutralists. It's two fifty to three fifty, 0:07:34.240 --> 0:07:36.440 and as a matter of fact, we are just below that. 0:07:36.560 --> 0:07:38.680 So I'm not sure he actually made a judgment yesterday. 0:07:38.680 --> 0:07:41.880 Did he's just standing a matter of fact. I think 0:07:42.120 --> 0:07:44.200 that you're right. I think that it was a matter 0:07:44.240 --> 0:07:49.320 of fact, and that he did not intended to over 0:07:49.640 --> 0:07:54.000 I would say communicate to the market that there was 0:07:54.000 --> 0:07:57.480 a change in the perception on the one hand, and 0:07:57.600 --> 0:08:02.440 in the in the likely decision of the Open Market Committee, 0:08:02.440 --> 0:08:05.200 so I would very much agree with you. That being said, 0:08:05.440 --> 0:08:08.200 it was very well done in my opinion, and of 0:08:08.240 --> 0:08:11.480 course what counts is what you do, not only what 0:08:11.680 --> 0:08:15.920 you are pre announcing of any overinterpretation of words, and 0:08:16.120 --> 0:08:18.920 we will see what happens. I have full confidence in 0:08:18.960 --> 0:08:21.640 the Open Market Committee to continue to do what is 0:08:21.720 --> 0:08:26.480 needed in the present circumstances where obviously we have the 0:08:26.560 --> 0:08:31.640 two targets of the of the Central Bank are very attained, 0:08:31.760 --> 0:08:35.080 if I may, in terms of employment full employment and 0:08:35.160 --> 0:08:39.719 in terms of overall solid anchoring of infession expectations in 0:08:39.800 --> 0:08:42.560 line close to be in line with the definition of 0:08:42.559 --> 0:08:45.400 price stability, which by the way, is the same in 0:08:45.520 --> 0:08:49.439 all four major central banks that are issuing the currency 0:08:49.600 --> 0:08:52.640 that are in the s d R apart from the 0:08:52.720 --> 0:08:55.920 Renman b you know, the four others are the Sterling, 0:08:56.200 --> 0:09:00.280 the end, the yar, and the dollar, and all centle 0:09:00.360 --> 0:09:03.880 banks have the same definition two or close to two percent. 0:09:04.040 --> 0:09:08.080 That's very important. It's a byproduct of the crisis, in 0:09:08.160 --> 0:09:12.560 my opinion, solidly anchoring inflation expectations at a level which 0:09:12.600 --> 0:09:15.480 would be understood by everybody. So we're at this delicate 0:09:15.520 --> 0:09:18.120 part of the cycle for the United States and for 0:09:18.160 --> 0:09:20.240 the federal serve as well. He's not just trying to 0:09:20.320 --> 0:09:22.640 weigh what happens with the labor market and potentially with 0:09:22.679 --> 0:09:26.240 inflation as well, he's also trying to weigh financial stability concerns. 0:09:26.240 --> 0:09:28.240 And Jean Quatricia, you know, as well as anyone listening 0:09:28.280 --> 0:09:31.160 to jerm Powell over the last year or so, again 0:09:31.200 --> 0:09:34.120 and again and again, he states that the last downturns, 0:09:34.160 --> 0:09:36.240 the last few downturns over the last few decades, have 0:09:36.320 --> 0:09:40.000 been caused not by inflation overshoots, but by financial instability 0:09:40.000 --> 0:09:43.400 and financial crisis. How do you set monetary policy to 0:09:43.400 --> 0:09:47.960 account for that and anchor inflation expectations too. No, that 0:09:47.960 --> 0:09:50.480 that's a very very important point. There is absolutely no 0:09:50.600 --> 0:09:53.280 doubt that. Also one of the consequence of the crazies 0:09:53.400 --> 0:09:57.880 was to put the central banks, as I would say, 0:09:58.080 --> 0:10:05.080 very close to the financial stability mandate, without changing necessarily 0:10:05.080 --> 0:10:07.679 the mandate, but putting the center bank very close. And 0:10:07.760 --> 0:10:10.880 I have been the witness myself or the setting up 0:10:10.880 --> 0:10:14.800 of the Financial Stability Oversight Council on in the US 0:10:14.880 --> 0:10:17.360 of the European Systemic Risk Board, which I was the 0:10:17.440 --> 0:10:22.560 first chairman of. As a consequence of the crisis and 0:10:22.640 --> 0:10:25.360 that that is very very important. And I take it 0:10:25.440 --> 0:10:29.480 that what what Chairman Powells said on what they were doing, 0:10:31.920 --> 0:10:37.880 encouraging resilience in the financial system, monitoring financial instability and 0:10:37.960 --> 0:10:41.360 being transparent, and he was very transparent. Obviously, I think 0:10:41.360 --> 0:10:44.560 it was it was certainly part of the responsibility of 0:10:44.600 --> 0:10:47.520 the of the center bank. Do we have too much 0:10:47.920 --> 0:10:52.439 forward guidance now? Do we have enough? Or do we 0:10:52.520 --> 0:10:56.040 have to ebb it back as clearly Mr Powell is stating, 0:10:56.080 --> 0:10:59.719 and I would suggest you agree with to the engineering 0:10:59.760 --> 0:11:03.079 mark some which is data dependency. Well, first of all, 0:11:03.360 --> 0:11:06.120 the various central banks are not exactly in the same situation. 0:11:06.280 --> 0:11:11.079 As you know. The US FED is much in advance 0:11:11.720 --> 0:11:15.120 on Europe, not surprisingly because Europe in the business cycle 0:11:15.840 --> 0:11:20.240 had a lag visavi the US because of the sovereign 0:11:20.320 --> 0:11:22.800 risk crisis. So there is a difference. So I take 0:11:22.840 --> 0:11:26.559 it that the forward guidance in Europe is absolutely necessary 0:11:26.720 --> 0:11:29.439 because we are in the citucation realm and market participants 0:11:29.440 --> 0:11:32.720 have to know what will happen. In the US, clearly 0:11:33.000 --> 0:11:38.319 we are less close to absolute necessity forward guidance, and 0:11:38.400 --> 0:11:41.160 it seems to me that you can understand what said, 0:11:42.480 --> 0:11:44.720 were the two questions here? One of them is really important. 0:11:44.840 --> 0:11:46.520 Let me go with the weaker one. First, the news 0:11:46.520 --> 0:11:49.760 flaws extraordinary with Deutsche Bank, un a credit the financial 0:11:49.800 --> 0:11:52.920 system of Europe. John, and I every day of a 0:11:53.040 --> 0:11:58.200 mystery over the chronic nature of negative interest rates. You 0:11:58.240 --> 0:12:01.640 didn't study negative interest rates as a kid, and yet 0:12:01.760 --> 0:12:05.280 bankers are living with it each and every day, particularly 0:12:05.280 --> 0:12:08.000 in Germany. Now that's true. How does this how do 0:12:08.040 --> 0:12:12.320 you perceive this ending? Well, first of all, I take 0:12:12.400 --> 0:12:17.280 it that it was necessary at time, and as you know, 0:12:17.559 --> 0:12:21.680 it will still be there until probably the last quarter 0:12:21.960 --> 0:12:25.640 or the end of the third quarter of next year. Uh. 0:12:25.720 --> 0:12:29.240 At the very beginning, the trust was those negative rates 0:12:29.280 --> 0:12:33.120 will have devastating consequences on all the funcial sphere, and 0:12:33.160 --> 0:12:36.280 particularly on the banks. I would say the judgment is 0:12:36.360 --> 0:12:39.600 much more nuanced now because we saw how banks, some 0:12:39.720 --> 0:12:44.440 of them, the best managed banks, could cope with it. 0:12:44.600 --> 0:12:48.760 So I would say it's it was very very non conventional, 0:12:48.800 --> 0:12:54.800 obviously probably necessary. And what about now and what about 0:12:54.800 --> 0:12:57.520 in two thousand twenty? How do you get off, as 0:12:57.559 --> 0:13:00.760 you correctly stated in a panel, the ax of Weber, 0:13:00.920 --> 0:13:05.200 the addiction of all this. No, it's clear that we 0:13:05.280 --> 0:13:10.120 have to get progressively I would say, serenely out of 0:13:10.200 --> 0:13:13.520 a situation which is totally non conventional, and we are 0:13:13.559 --> 0:13:15.800 starting to do that, as you know, because because the 0:13:15.920 --> 0:13:19.320 the end of tapering is for the end of this year. 0:13:19.480 --> 0:13:23.360 In Europe again we have lags in comparison with the 0:13:23.440 --> 0:13:26.720 United States of America. But the course, the course is 0:13:26.760 --> 0:13:29.160 more or less the same sequence. But Jean Claude, there 0:13:29.200 --> 0:13:30.760 is a big question that I think we have to 0:13:30.800 --> 0:13:35.120 start exploring the prospect that we're stuck here, that we 0:13:35.200 --> 0:13:37.880 don't get away from zero in the euro Zone because 0:13:37.880 --> 0:13:40.000 the cycle doesn't last long enough for them to do it. 0:13:40.360 --> 0:13:44.120 You're starting to think about that, Yes, yes, of course, 0:13:44.600 --> 0:13:47.839 as I already said, of course it's very very important 0:13:48.320 --> 0:13:53.440 that we are real feeling the overall weaponry of I 0:13:53.440 --> 0:13:55.560 would say, not on the central banks, but also the 0:13:55.600 --> 0:13:59.360 governments and all kinds of of tools that can be 0:13:59.440 --> 0:14:02.719 utilized when we have to cope with the next recession. 0:14:03.160 --> 0:14:05.520 The main problem for the European would be that when 0:14:05.559 --> 0:14:08.600 the US, which is ahead in the cycle, has its 0:14:08.600 --> 0:14:13.160 recession by contagion, we might have a big, big problems 0:14:13.720 --> 0:14:17.080 for us. Even if it would not be appropriate in 0:14:17.240 --> 0:14:21.040 terms of business cycle in Europe. So we will see. 0:14:21.080 --> 0:14:23.880 But again I take it that what is being done 0:14:24.160 --> 0:14:29.320 right now is correct. That we have in mind that 0:14:29.600 --> 0:14:33.880 you have several weaponry that we are non conventional, the 0:14:33.920 --> 0:14:38.000 interest rates of course, and also the quei or so 0:14:38.080 --> 0:14:44.800 called quei, and we have to do that, namely normalize 0:14:45.240 --> 0:14:48.600 progressively and as I said, serially, if we do not 0:14:48.760 --> 0:14:51.120 want to have counter productive effect. But I take it 0:14:51.200 --> 0:14:53.920 that all santle bankers in the world are fully aware 0:14:54.400 --> 0:14:57.840 of the fact that the main, main, major issue for 0:14:57.880 --> 0:15:00.880 them would be the next slow down of the circle. 0:15:00.920 --> 0:15:03.480 For anyone just joining us on Bloomberg Radio, Jean claud 0:15:03.480 --> 0:15:07.080 Trichet joining Bloomberg Surveyments this morning, the former European Central 0:15:07.080 --> 0:15:10.040 Bank President Jean Claude talking about the next cycle. I 0:15:10.040 --> 0:15:12.000 think what is really interesting when you were at the ECB, 0:15:12.680 --> 0:15:16.720 the periphery started trading like credit. Sovereign debt in Italy 0:15:16.920 --> 0:15:20.640 in Spain has all the characteristics of a credit and 0:15:20.680 --> 0:15:23.720 not a sovereign. That's still the case. So let's explore 0:15:23.760 --> 0:15:26.920 this further. We go into the next downturn and Italy 0:15:27.000 --> 0:15:29.640 still trades like credit. How much of an issue is 0:15:29.680 --> 0:15:35.200 that going to be? Well? Again, Italy today is more 0:15:35.240 --> 0:15:37.120 or less a paradox. On the one hand, they have, 0:15:37.240 --> 0:15:41.800 of course a lot of liabilities, including one percent of 0:15:41.880 --> 0:15:47.680 the GDP in terms of of I would say state 0:15:48.760 --> 0:15:52.880 over outstanding debt, so that that's big. On the other hand, 0:15:52.920 --> 0:15:55.720 they have a card account surplus which is not negligible. 0:15:56.120 --> 0:15:58.720 They have a primary surplus in their budget, which is 0:15:59.000 --> 0:16:03.320 something so and the appropriate in the circumstances, but which 0:16:03.360 --> 0:16:06.560 is there, and you know that they have because they 0:16:06.600 --> 0:16:10.120 have a current account which is behaving quite properly. They 0:16:10.160 --> 0:16:15.840 have a lot of I would say domestic investments that 0:16:15.880 --> 0:16:21.760 are in the overall UH indebtedness of Italy, so they 0:16:21.760 --> 0:16:26.000 are not as vulnerable as the market is very often 0:16:26.800 --> 0:16:29.920 saying I think we have to be more nuanced on 0:16:29.920 --> 0:16:33.040 on Italy. What is clear, of course, is that the 0:16:33.080 --> 0:16:37.720 new government very I would say sadly, has decided to 0:16:37.760 --> 0:16:42.680 give the worst possible messages to the market. But I 0:16:42.720 --> 0:16:46.840 am not desperate. It seems to me that the more 0:16:47.080 --> 0:16:50.840 I would say, sound and reasonable messages might come now, 0:16:51.000 --> 0:16:54.680 and I take it as important. The meeting of the 0:16:54.680 --> 0:16:57.640 Prime Minister of Italy with the President of the Commission. 0:16:57.720 --> 0:17:01.520 You've written for decades about realism it is finally here. 0:17:01.600 --> 0:17:03.440 We see it in each and every vote, and we 0:17:03.480 --> 0:17:05.960 see it in the struggles of Mr McCraw and the 0:17:06.080 --> 0:17:08.720 protests on the chance. Elise Madame mc gard once told 0:17:08.720 --> 0:17:12.040 me the protest is the art of France, that people 0:17:12.080 --> 0:17:15.120 do it there a lot. What was unusual about these 0:17:15.119 --> 0:17:18.800 recent protests and does it speak to a fragility of 0:17:19.000 --> 0:17:22.880 Mr mccrow's plans forward. Well, first of all, I think 0:17:22.920 --> 0:17:26.240 that all the advanced economy have to cope with populism. 0:17:26.440 --> 0:17:29.639 The UK, it's clear with the Brexit, the US, clear 0:17:29.680 --> 0:17:34.880 with the election of President Trump, and all continental European. Fortunately, 0:17:35.440 --> 0:17:39.439 the populism in continental Europe and in Ireland is not 0:17:39.560 --> 0:17:44.879 directed against Europe first, but against the national government first, 0:17:45.320 --> 0:17:48.639 and that is something which explains also the resilience of 0:17:48.800 --> 0:17:52.000 the European institutions and on on the aarea in the 0:17:52.000 --> 0:17:56.439 worst crisis since World War Two. As rigas France, I 0:17:56.440 --> 0:18:01.200 would say President mccon engaged in very very important reform. 0:18:01.640 --> 0:18:04.399 He was right to do so. It was really the 0:18:04.400 --> 0:18:07.560 mandate he had received from the people. Of course, that 0:18:07.600 --> 0:18:11.560 would be very very damaging for his political capital. That's 0:18:11.600 --> 0:18:14.720 unavoidable because most of the reform you have to do 0:18:14.880 --> 0:18:17.040 because they are good for the country in the medium 0:18:17.040 --> 0:18:20.080 and long run, have a cost, a political cost on 0:18:20.119 --> 0:18:23.000 the short run. So I'm not surprised. But what has happened? 0:18:24.080 --> 0:18:28.320 What what is associated with this? I would say loss 0:18:28.320 --> 0:18:32.240 of political capital, but it would it would reconquer if 0:18:32.359 --> 0:18:35.480 if I may, I'm sure that he has time this 0:18:35.640 --> 0:18:40.000 political capital. But the so called yellow jacket is something 0:18:40.040 --> 0:18:45.320 which comes out of the digital revolution, clearly, exactly like 0:18:45.400 --> 0:18:49.639 in the US, the digital revolution is the technology. It 0:18:49.640 --> 0:18:52.760 seems to me, yes, because because they are bypassing all 0:18:52.880 --> 0:18:56.560 possible organizations. John and I wanted to speak about German power, 0:18:56.880 --> 0:18:59.760 about the future of Europe, but there's also larger matters 0:18:59.800 --> 0:19:03.080 that saw Paris Saint your Man beat Liverpool and John, 0:19:03.119 --> 0:19:08.159 what was extraordinary is Olympic leon A tied Manchester City. 0:19:08.280 --> 0:19:11.199 No one expected that weekend to say football we did. 0:19:14.200 --> 0:19:17.480 Are you a huge supporter of Olympic Leon? I am 0:19:17.560 --> 0:19:22.400 not really soccer enthusiasts. You know that you can come 0:19:22.400 --> 0:19:26.239 on the show. You have not the best intellocutor, Well, 0:19:26.480 --> 0:19:30.760 I could make mistakes in judging. I was surprised myself, 0:19:30.840 --> 0:19:35.919 of course, because because Manchester City, it's Manchester City. It 0:19:36.040 --> 0:19:39.720 is yeah, I had a fantastic computations, but we will 0:19:39.760 --> 0:19:45.080 see me in any case, How does how does France 0:19:45.240 --> 0:19:49.919 compete in something as visible as football versus the capitalist 0:19:50.040 --> 0:19:54.240 juggernaut of the Premier League in England? I cannot tell 0:19:54.320 --> 0:19:59.800 you again. I'm not again a real expert in this. 0:20:00.560 --> 0:20:02.399 I love that we have the former president of the 0:20:02.400 --> 0:20:05.720 European Central Bank and you are so keen together. I 0:20:06.640 --> 0:20:09.080 figured a guy from Leon looked up to see if 0:20:09.080 --> 0:20:11.119 he was on the board of Olympico and he was 0:20:11.160 --> 0:20:14.560 busy running the Bank of France from and then in 0:20:14.600 --> 0:20:16.520 the early two thousands you had this other job to 0:20:16.520 --> 0:20:19.280 do over the e CB. Jean Corda want to wrapped 0:20:19.280 --> 0:20:21.560 things up with a delicate story, a delicate topic. And 0:20:21.560 --> 0:20:23.280 you and I have gone back and forth on this before, 0:20:23.320 --> 0:20:25.040 and you're a good sport when we talk about it. 0:20:25.480 --> 0:20:27.720 The great hikes of two thousand and eight and two 0:20:27.760 --> 0:20:30.240 thousand and eleven at the e c B, A lot 0:20:30.280 --> 0:20:33.399 of people look back and say that was a policy error. 0:20:33.720 --> 0:20:36.040 Walk me through how difficult it is to know whether 0:20:36.119 --> 0:20:38.720 you are indeed making a policy error or not, and 0:20:38.720 --> 0:20:41.920 how fine the decision actually is that you make well 0:20:42.480 --> 0:20:45.920 to do replace myself in the circumstances. I would say 0:20:45.960 --> 0:20:49.320 that what was extremely important for me was to be 0:20:49.400 --> 0:20:52.840 able in any case to engage in very bold and 0:20:52.920 --> 0:20:56.800 swift non conventional measures as well I did with my 0:20:56.840 --> 0:21:01.200 colleagues in or seven nine of August or seven, we 0:21:01.320 --> 0:21:04.320 gave a limited supply of liquidity to all our banks 0:21:04.400 --> 0:21:07.679 and they were asking for ninety five billion euros. We 0:21:07.720 --> 0:21:10.800 gave ninety five billion euros. It was very much criticized 0:21:10.840 --> 0:21:14.919 at the time, but it won me the Man of 0:21:14.960 --> 0:21:17.520 the Year of the fancial times because it was swift 0:21:17.640 --> 0:21:21.080 and bold, swift indeed because we took that decision in 0:21:21.119 --> 0:21:23.600 two hours and a half and the same it was 0:21:23.640 --> 0:21:27.320 the same when we had both. I would say the 0:21:27.320 --> 0:21:30.760 the private sector crisis coming from from Wall Street with 0:21:30.920 --> 0:21:33.840 Lemon Mothers, where we generalize the fuller lot Ma tad 0:21:33.840 --> 0:21:36.960 fix rate of liquidity, which again was very very bold 0:21:37.000 --> 0:21:39.919 because all the banks could ask for everything. At the 0:21:40.000 --> 0:21:44.080 same time, I had a mandate and as my successor 0:21:44.240 --> 0:21:47.600 and my predecessor, which was to deliver price stability, be 0:21:47.760 --> 0:21:51.920 credible in the delivery of priceability, and avoid any kind 0:21:52.040 --> 0:21:56.920 of doubts in major public opinion in Europe. And I 0:21:57.920 --> 0:22:02.720 did both if I may, I was anchoring solidly inflation 0:22:02.840 --> 0:22:06.480 expectations at times where we had a high level of inflation. 0:22:06.520 --> 0:22:09.879 I have known four pucent inflation. You know, the central 0:22:09.920 --> 0:22:13.280 bankers to the dream of that on your work you 0:22:13.440 --> 0:22:16.560 enjoyed on my watch, I had four when I left. 0:22:16.920 --> 0:22:19.760 I had in the year where I left three two 0:22:19.760 --> 0:22:22.480 point seven percent when I left, So we were in 0:22:22.480 --> 0:22:28.720 a different universe. And again I was equally anxious to 0:22:29.000 --> 0:22:32.720 deliver press stability and be credible in that delivery, including 0:22:32.880 --> 0:22:38.640 in major public opinion that very often anxious. The main 0:22:39.320 --> 0:22:43.480 the main fear of half of Europe was we are 0:22:43.680 --> 0:22:48.840 engaging in some kind of new I would say, experience 0:22:48.960 --> 0:22:52.800 never attempted in the past, and we will have inflation 0:22:53.280 --> 0:22:58.520 when you emerge the d M, the Guilder and say 0:22:58.640 --> 0:23:02.359 that the escudo and very quickly, is the bundes Bank 0:23:02.520 --> 0:23:07.840 now a different Bundesbank when you were on the watch, Yes, certainly, 0:23:07.920 --> 0:23:12.480 because now they have twenty years of experience with within 0:23:12.760 --> 0:23:15.880 the system and the open system of central banks. So 0:23:16.040 --> 0:23:20.520 this is certainly a different Bundesbank. You have also the experience, 0:23:20.560 --> 0:23:25.400 the benefit of the experience. But of course I see 0:23:25.400 --> 0:23:30.159 the Bundesbank as always keen or not losing contact with 0:23:30.400 --> 0:23:33.720 the public opinion in his own country, in her own country. 0:23:34.000 --> 0:23:37.360 That being said, the people of Germany, and I think 0:23:37.400 --> 0:23:40.199 it's paying hammage to all what has been done by 0:23:40.240 --> 0:23:42.840 the e c B is in favor of the u 0:23:42.880 --> 0:23:48.120 W at the level of of the citizens in Germany 0:23:48.200 --> 0:23:52.479 eighty percent. So it's the success of the UH is 0:23:52.560 --> 0:23:55.840 proved in a way by the support of the people. 0:23:55.920 --> 0:23:57.720 I've got a tricky question to wrap up. This is 0:23:57.760 --> 0:24:00.520